Payment System Oversight

Payment systems, as a set of instruments, procedures, and rules for the transfer of funds between two or more participants, are of vital importance for economic and financial activities in a country. In well-functioning financial systems, payment transactions are timely and safely transferred and executed, and as such, they support financial stability and foster growth. As opposed to that, errors and problems in the performance of the payment system can be very expensive; moreover, they can be substantially more expensive for the entire economy than for any payment system owner and participants.

Payment system oversight is a CBCG function and its ultimate objective is to contribute to the safe and efficient functioning of the payment systems in Montenegro and thus to financial stability in the country, which is one of the institution’s key responsibilities.

Safety refers to how well risks connected with the realisation of processes in the payment system are understood, measured, and controlled. These risks include liquidity, credit, legal, and operational risks, as well as general business risk that can include great risk to a systemic component in a situation in which an inability of one or several participants to perform the activity results in the inability of other participants to meet their obligations on time, which can then result in a series of adverse consequences. The inability of a payment system to settle payment transactions for any reason whatsoever can have a significant adverse impact on the markets it serves and the economy in general.

Efficiency refers, in general, to what extent and in which manner effective relevant entities in a payment system (operator, participants) use resources for the performance of their functions.

The CBCG oversees high-value payment systems in Montenegro and retail payment systems, which are of importance for intraday operations/activities of Montenegrin citizens and public confidence in the mechanisms and manner of executing payment transactions. In addition, the oversight activities focus on the payment system as a whole.

In performing its duties with respect to oversight of the payment system, the CBCG applies principles and practices that are based on international principles and best practices and standards and rules determined by the European Central Bank. Therefore, as of 2016, in the process of assessment of payment system compliance, the CBCG has applied a set of principles which are based on the principles published by the Committee on Payments and Market Infrastructures of the Bank for International Settlements and the International Organisation of Securities Commissions – Principles for Financial Market Infrastructures.

A payment system operator is primarily responsible for the reliable functioning of the payment system and consequently, it is expected to provide the compliance of the system it operates with the adopted standards.

The Central Bank of Montenegro policy of transparency with regard to its oversight function means that the results of it are published in the CBCG Annual Report.

Relevant International Standards

Bank for International Settlements – Committee on Payments and Market Infrastructures

European Central Bank